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General practice fundholding has become a policy problem for the NHS. Hailed as a success only a few months into its operation,1 it now seems dogged by limited advantages, high costs, and unintended consequences.

So far the only demonstrable advantage to fundholders has been a reduction in prescribing costs.2,3 This is an eccentric achievement in a country whose prescribing costs historically have been among the lowest in western Europe.4 It tells us nothing about either the quality of care, which may decline as costs are cut, or the long term economic costs of short term savings on prescribing, which may be appreciable.5

The economic costs of fundholding are considerable and include both open costs (such as management fees, subsidies for computerisation, and the administrative costs of billing and reviewing contracts) and hidden costs (such as costs for staff in family health services authorities, hospitals, and the Audit Commission). The political costs may be equally important …